University Square, the struggling shopping center at Cedar and Warrensville Center roads in University Heights, may be redeveloped with a housing component.
University Heights Mayor Susan Infeld said Lapis Advisers, a San Francisco-based investor that is the majority holder of bonds tied to University Square, has a vision for redevelopment of the site with both housing and retail.
“The owners have suggested housing, as they believe there is enough retail in the area and additional retail is not needed to meet the needs of the community,” Infeld said. “I actually agree with the assessment.”
According to Infeld, the proposed housing would be geared for two age groups: apartments and lofts for young professionals on the Cedar Road side of the property, and apartments for people ages 55 and over on the Warrensville Center side.
“We don’t have a lot of apartments or one-story living homes in University Heights, so this could meet the needs of people who want to stay in University Heights but don’t want to live in a home with stairs or do yard work anymore,” she said.
RDL Architects of Shaker Heights has designed a proposed plan, incorporating both housing and retail elements.
RDL’s drawings and renderings can be viewed on the city’s website, universityheights.com. A spokesperson for the firm said the drawings are conceptual and not final.
“I like the plan – I think it looks great – and I have received a lot of positive feedback from residents,” Infeld said. “Without exception it’s been positive. They think housing sounds good, with plenty of retail; they understand the vision.
“It depends on whether the owners can find a developer that shares their vision in order for it to move forward.”
Kjerstin Hatch, managing principal and founder of Lapis Advisers, said nothing has been finalized regarding the design, nor has a developer been chosen.
“It’s obviously a very complicated redevelopment,” Hatch said in a telephone interview from her office in San Francisco. “A lot of effort is being expended to try to understand what is best, and the city has been included in the discussion, but there’s still a lot of work to do.”
Hatch said “several” developers have expressed interest in the project and have “various visions.” She noted about seven developers attended an open house at the site last summer “to gather and learn about the property.”
“There may be more than one developer involved,” she said. “It’s a big site. We asked RDL (Architects) to look at the site and what exists and what could that be converted into, and I think they did a great job. That work was done so the trustee could provide potential developers more information.”
UMB Bank, the Minneapolis-based trustee, hired RDL Architects to do the drawings. In 2014, Lapis Advisers bought most of the $40.5 million in bonds that were issued by the Cleveland-Cuyahoga County Port Authority in 2001 to pay for construction of the 2,000-plus-space parking garage at University Square.
“When we bought the bonds, we knew they needed to be restructured,” Hatch said. “What we are working to do, with the trustee, is eliminate the structure that exists now so a new property owner won’t have that bond burden. But getting those bonds restructured is easier said than done.”
Not much remains of the University Square shopping center that opened in 2002 except the two anchor stores, Macy’s – originally Kaufmann’s – and Target, both of which own their own parcels. The bondholders own the remainder of the 287,000-square-foot center, which consists almost entirely of vacant retail spaces.
Applebee’s is still there, but T.J. Maxx/HomeGoods will move to Oakwood Commons in South Euclid later in March.
“When leases expire, tenants leave,” Infeld said. “We have seen that happen over and over at University Square.”
A Michigan-based entity called University Heights University Square Holdings 4 LLC bought the multilevel plaza in an online auction in 2013 for just $175,000. But the buyer failed to pay more than $12 million in property taxes and service payments, and in 2015, the city and bondholders filed a foreclosure action in Cuyahoga County Common Pleas Court against the owner for that nonpayment.
In January 2016, Cuyahoga County Common Pleas Judge Nancy McDonnell approved a settlement in the lawsuit and dismissed the foreclosure. As part of the settlement, she assigned ownership of the property to the bondholders.
“The city has no ownership interest in the development,” Infeld said. “It is only owned by the bondholders, so it is a private investment.
“But obviously, the city agrees that redevelopment of the site would likely yield a better use. I believe we have a missed opportunity for a full use of University Square in its current form.”
Hatch said Lapis Advisers has no specific timetable for moving forward with the redevelopment.
“We’d like to do it sooner rather than later, but it’s very complicated,” she said.